The aim of this Wiki is to explore the use of Zero Hour Contracts (ZHC) of employment in workplaces in the United Kingdom (UK) and establish whether it is a new trend in management practice. In order to do so firstly this wiki will look at what a contract of employment is, how it has developed over time, why is it necessary for management and workforce to have one and the importance of legal classification of workforce. Secondly what ZHCs are will be defined and their development over time will be explored, both from a management’s perspective and from an employee’s perspective. Thirdly this Wiki will look at the underlying reasons for why they are used in management practice in organisations. Lastly ZHCs of employment will be assessed to understand whether they are a new trend in management practice.
Contract of Employment – Law perspective
The contract of employment made between the employer and workforce dates back to Roman Empire where it used to be known as locatio conductio operarum (Zimmermann, 1990). It set out the relationship between a worker – a person who was willing to give his labour and time for a remuneration – and employer as someone who was willing and able to remunerate the labour provided by the workforce. The contract aimed to clarify what work has to be carried out and the amount of remuneration that would be paid in order to avoid any disputes regarding the pay. In more recent times and up until the Industrial Revolution the worker-employer relationship was based on status in the UK. Although guilds protected the interests of artisans of different sectors, the majority of the population in the UK were divided by serfdom and as a result had limited or no legal rights to negotiate their pay, working conditions or other matters such as sick leave. The employer had significant control over the employee and could even take penal actions against the workers if they did not do what they were told which was made possible by the Master and Servant Act (Games, 2007). Contracts of employment have evolved since then. At present every worker in the UK who is employed by an employer has a contract of employment which sets out the employment relationship between the two parties (ACAS, 2017). The contract of employment will normally set out the terms of the relationship and cover areas of - employment conditions, holiday entitlement, rights, responsibilities and duties of both sides of the agreement (GOVUK, 2016a). A significant amount of details are usually set out in the contract of employment in order to identify which party is responsible for which actions. In the UK contracts of employment and the following legal rights distinguish between a worker and an employee (GOVUK, 2016b). The differentiation allows organisations and workforce to have more flexibility in terms of their responsibilities to each other. The employment protection legislation varies depending on the legal classification of the personnel in the contract of employment (see Table 1).
Table 1: Workforce rights according to their classification
Rights
Workers
Employees
Receive at least National Minimum wage
✓
✓
Statutory minimum level of paid holiday
✓
✓
Not to be treated unequally if work on zero-hour contracts
✓
✓
Minimum notice periods of employment termination (dismissal)
✓
Rights to request flexible working
✓
Time off from work for emergencies
✓
Statutory redundancy pay
✓
Statutory sick pay
✓
Maternity and paternity leave and pay
✓
Protection against unfair dismissal
✓
✓
Source: GOVUK, 2016b.
By having different legal classifications of workforce, the employer can enjoy more flexibility and diversity when managing their personnel. It becomes easier to employ personnel, or make them redundant, reducing the cost of this. This, in turn, makes an organisation more agile in an ever-changing economic environment. To gain the highest level of flexibility organisations often adapt zero hour contracts (ZHCs) which allow employers to recruit personnel which is highly flexible to changing market and economic conditions.
Flexible workforce
Numerical and Functional flexibility
Upton (1995) suggests that flexibility is the ability to change or react to changing processes in the environment and to do it in a way that does not cause losses in terms of time, effort, cost or performance. Pinker et al. (2009) expands on the definition and suggests that flexibility is not only the ability to react and change to changing processes, but rather flexibility should be seen as the absence of constraints. In the absence of constraints management can better match the supply of resources to the demand and the closer to complete absence of constraints the organisation is the more agile it can be in the marketplace. Atkinson (1985) proposes that employment flexibility can be achieved through two distinct ways - numerical and functional flexibility. Numerical flexibility allows to deal with business cycle fluctuations and business trends by reducing capacity of workforce in the organisation which in turn reduces variable costs of the operation and liabilities. Numerical flexibility is achieved by adjusting the amount of workforce to changing circumstances in the market by giving flexible contracts and/or by outsourcing. To gain numerical flexibility organisations can hire employees on part-time, casual, zero-hour and other types of flexible contracts of employment. This allows organisations to hold on to its workforce. Outsourcing involves subcontracting activities to other businesses and reducing the overall amount of employees directly employed. Gorg and Hanley (2004) suggest that the success of outsourcing depends on the size of the organisation, and the size of transaction costs. If transaction costs are high a small organisation may not benefit from the activity whilst a large organisation can benefit from the activity at least in the short run. Therefore the results from gaining numerical flexibility for organisations and employees can be diverse and are dependent from each case individually. Unison (2017) argues that although outsourcing may lead to a reduction in liabilities and increased profitability, it is also the reason for the rise of a two-tier workforce. The rise leads to increased inequality amongst people who do the same job and have the same responsibilities, but are employed by another organisation or under a different type of employment contract. Functional flexibility on the other hand relates to changes in the tasks and the amount of tasks that employees need to carry out, it is seen as skill adjustment of workforce to meet changing workplace demand, and thus does not reduce the liabilities of the organisation towards the workforce. Therefore for organisations numerical flexibility can be seen as a more appropriate way of adjusting to changing market demands as a significant part of risk is transferred from employer to workforce. Fredman (1997) suggests that flexible working is a mere transfer of risks of business cycles from employer to the employee and notes that these types of contracts are characterized by insecurity, unpredictability and in some cases fluctuations in pay for the workforce. Although flexible working arrangements have been used throughout history, the development of technology, transportation, communication, and trade openness has led to an increase pressure on organisations to have a numerically flexible workforce to adapt to changing economic and business conditions. Whilst from an employee perspective ZHCs could be seen as downgrading of their rights and bargaining position in the workplace, Chan (2014) suggests that flexible and competitive labour markets can greatly benefit businesses in times of economic hardship and allow organisations to take on more risk.
Zero-Hour Contract of Employment – the Highest Stage of Flexible Workforce
What are zero hour contracts?
In comparison to a traditional contract of employment ZHC is not a legal term and has no specific legal status in the UK (Eurofund, 2015). Furthermore, it does not have one specified legal definition either. ACAS (2017b) suggests that most ZHCs will give the staff ‘worker’ employment status, however Eurofund (2015) notes that this can vary depending upon different firms. The main difference that distinguishes ZHCs from other contracts of employment is that under this type of contract the employer is not obliged to provide the employee with a predetermined set amount of hours of work or any work at all over any period of time (CIPD, 2017). At the same time, ZHC worker is not obligated to accept the offered work and can, following the Small Business, Enterprise and Employment Act 2015 which included a ban on Exclusivity clauses in ZHCs, work for other employers (Simpson, 2015). Furthermore, staff with a ‘worker’ status are entitled to fewer rights than staff with an ‘employee’ legal employment status (see Table 1). Office of National Statistics (ONS) (2016) suggests that the ZHCs of employment may not always be explicitly called this way and different terminology may be used. Therefore by not having a legal definition and status, organisations can in some cases interpret the ZHCs in different ways and as a result the rights and responsibilities of the employer and employee relationship may differ depending on the organisation itself, market it operates in and other industry specific conditions. However, the common element that unites the different types of contracts is the absence of predetermined guaranteed set hours of work over a period of time, and the requirement by the employer towards staff to be available for work as and when required. Staff employed under these types of contracts have the legal right to choose the hours they work and to turn down the employer, if the hours do not fit them.
The rise of zero-hour contracts in the UK
The decade of 1980s, in the UK, saw two economic recessions, high interest rates and a continuous fall in manufacturing output coupled with high unemployment rates (Rogers, 2013). Fredman (1997) indicates that the trend of numerical flexibility in a workplace started during this decade. The power of collective bargaining, in the form of trade unions, was reduced significantly and their membership fell sharply during this period. Monetarism economic policy adoption coupled with supply-side economics of the UK government gave more flexibility to organisations in terms of recruitment which in turn gave rise to the non-standard jobs, employment agreements similar to ZHCs and other types of flexible working arrangements, which grew from 30% to 36% of total employment. Since then, ZHCs have been used to varying degrees by the management of organisations (depending on economic and business environments). Following the 2008 world financial crisis, and the subsequent aftermath, the UK unemployment rate grew (See Graph 1) from 5.7% in 2008 to a peak of 8.1% of total workforce in 2011 (Statista, 2017).
The high unemployment rate was the consequence of financial engineering by the world’s leading financial institutions which caused excessive, irresponsible lending and led to a rise of house-hold debt and a bubble in the real-estate sector (The Economist, 2013). As a result most world economies dipped in to recession and business confidence fell sharply. Research by ICAEW (2014) shows that in the UK it fell to -45.3 in 2009, the lowest point since 1980 (OECD, 2017). In times of economic and business future uncertainty, high rates of business bankruptcies coupled with rising unemployment rates may lead businesses to cut down investment and be reluctant to expand their operations. The uncertainty may lead to unknown demand and risk of significant financial losses resulting from lack of demand in the market both domestic and international. Organisations will seek to mitigate potential financial losses by adapting new management practices. In order to cut down on potential financial losses in the event of an unsuccessful expansion or investment and remain agile to changes in macroeconomic environment ZHC’s gained increased popularity amongst organisation management in the aftermath of the global financial crisis of 2008 (see Graph 2).
Organisation managements saw an opportunity to adapt to the change in the economic environment by adapting zero hour contracts. It was particularly evident in the retail and hospitality sector. Statistical data about ZHC arrangements in the overall workforce are collected from two sources – surveys of business and surveys of workers. Although the statistical data shows that there has been positive growth, following the 2008 Financial Crisis, in the use of ZHCs, the collected statistical data reliability is subject to discussion and the real figure may be larger. O’Connor (2015) has raised concerns about the precision of the published data because
not all workers know the types of contracts they are employed under;
the business survey may also contain errors due to lack of seasonal employment adjustment;
it does not include micro-organisations which employ less than five staff.
Brinkley (2016) raises concern that although statistically the unemployment rate has reduced the amount of hour’s staff actually work per week under ZHCs is less than the what they would like to work. He indicates that although unemployment rate has fallen since the 2008 Financial Crisis it has also increased the rate of underemployment (see Graph 3) – a situation where employees are overqualified for the job they do or part-time workers willing to take a full time job cannot find one. However whilst the statistical data might not be precise due to problems in collecting data coupled with the potential problem of underemployment it is evident that the management of organisation utilises these contracts.
In particular the use of ZHC’s as a tool to provide flexibility for employer and workforce has been high in two sectors – hospitality and retail, both of which account for more than 50% of all UK ZHCs (see Graph 4). Research by TUC (2013) shows that the adaption of ZHCs have spread to industries such as health care, education, aviation industry.
This suggests that the use of ZHCs by organisation management is not limited to low skilled jobs in highly competitive industries with highly fluctuating demand, but it is also prevalent in other industries which require highly skilled staff whilst also demanding flexibility from them. As a result of increased international trade and competition, organisations are choosing flexible employment contracts to adjust to the changing environment of doing business.
Zero Hour Contracts - Management perspective
Pennycook (2013) suggests that from a management’s perspective ZHCs allow maximum flexibility in meeting the fluctuating and often unpredictable demand in the marketplace. Numerical flexibility, which is achieved through flexible employment contracts, of workforce is seen as a way of transferring risks and liabilities from management to the workforce. Kelleberg (2003) suggests that the push towards more flexibility through the utilization of numerical flexibility leads to workforce segmentation - the division of workforce into insiders and outsiders. The former tend to have higher job security and rights whilst the later are exposed to higher risk in job security and rights. As a result of this division between insiders and outsiders the pressure of polarization of workforce and wages is increased. From a managements perspective the division and polarization of workforce may be a positive effect as it reduces the strength of collective bargaining over employee rights and strengthens the position of the organisation. Thus, it is likely that the motivation and loyalty of workforce towards management will be reduced. Whilst ZHCs might not always be the best form of flexible working for workforce Peers (2013) suggests that flexible working arrangements are a good way for management to increase productivity and reduce costs. The ability of management to adapt the workforce to changing demand will allow utilising it to a high level of efficiency. The successful integration of numerical flexibility in an organisation improves the likelihood of management to expand the business operation in times of uncertainty, high risk ventures and rapidly changing marketplace where internal workforce flexibility is not possible and the workforce itself contributes to a large proportion of overall costs. Clements (2013) suggests that ZHCs not only provide organisations with flexibility in volatile times, but they also allow adapting to a rapidly diverse workforce with different requirements and needs. By being able to offer ZHC flexibility to workforce in terms of choosing when to work, and the ability to work for several employers at a time, following the ban on exclusivity rights, gives organisation management the chance to recruit talented workers who might otherwise not take on the job due to restrictions in their flexibility.
Are Zero Hour Contracts a New Trend in Management?
Based on solely statistical data it is unclear whether the use of ZHCs in the workplace is a trend in management practice to reduce risk and liabilities, or it is the result of raised awareness of such contracts that has led to the significant increase in numbers of these contracts since the 2008 Financial Crisis reported to ONS. As a result, a significant statistical error may be present. Hern (2013) suggests that although a person might be employed under a ZHCs and Office of National Statistics might see the person as working, in reality it can be the case that the person does not actually work any hours for the employer. Although it is difficult to collect reliable data, from a management practice perspective it is evident that the use of these contracts has grown following the increased economic uncertainty in the aftermath of the financial crisis. The increased numerical flexibility that organisations can achieve through ZHCs, and often offer flexibility to their staff, allows adapting to the rapidly changing globally integrated marketplace which is affected by global competition, demand. Often depending from the competitor country of origin labour market rigidness can be a disadvantage to the competitiveness of the domestic organisation.
Conclusion
The analysis of available data and information coupled with academic research shows that ZHCs are used by organisation management. In particular over the last decade there has been a significant growth in the awareness and use of these types of contracts. The main cause for using such contracts is risk and liability reduction from an organisations point of view, and the possibility to pick and choose when and how to work for the workforce. Although significant disadvantages from the workforce perspective were identified, the flexibility that is offered by these contracts may be seen as outweighing the negative aspects of ZHCs.
References
Atkinson, J. (1985) Flexibility, Uncertainty and Manpower Management. Brighton: The Institute For Employment Studies.
Fredman, S. (1997) ‘Labour Law in Flux: The Changing Composition of the Workforce’. Industrial Law Journal, 26 (4): 337-352.
Games, A. (2007) 'Masters, Servants, and Magistrates in Britain and the Empire, 1562-1955 (review)'. Journal Of Interdisciplinary History, 37 (4): 607-609.
Gorg, H. and Hanley, A. (2004) 'Does Outsourcing Increase Profitability?'. The Economic and Social Review. 35 (3): 267-288.
Upton, D., M. (1995) ‘Flexibility as process mobility: the management of plant capabilities for quick response manufacturing’. Journal of Operations Management, 12(3–4): 205–224.
Zimmermann, R. (1990) The Law of Obligations: Roman Foundations of the Civilian Tradition. Oxford: Clarendon Press.
Table of Contents
Introduction
The aim of this Wiki is to explore the use of Zero Hour Contracts (ZHC) of employment in workplaces in the United Kingdom (UK) and establish whether it is a new trend in management practice. In order to do so firstly this wiki will look at what a contract of employment is, how it has developed over time, why is it necessary for management and workforce to have one and the importance of legal classification of workforce. Secondly what ZHCs are will be defined and their development over time will be explored, both from a management’s perspective and from an employee’s perspective. Thirdly this Wiki will look at the underlying reasons for why they are used in management practice in organisations. Lastly ZHCs of employment will be assessed to understand whether they are a new trend in management practice.Contract of Employment – Law perspective
The contract of employment made between the employer and workforce dates back to Roman Empire where it used to be known as locatio conductio operarum (Zimmermann, 1990). It set out the relationship between a worker – a person who was willing to give his labour and time for a remuneration – and employer as someone who was willing and able to remunerate the labour provided by the workforce. The contract aimed to clarify what work has to be carried out and the amount of remuneration that would be paid in order to avoid any disputes regarding the pay. In more recent times and up until the Industrial Revolution the worker-employer relationship was based on status in the UK. Although guilds protected the interests of artisans of different sectors, the majority of the population in the UK were divided by serfdom and as a result had limited or no legal rights to negotiate their pay, working conditions or other matters such as sick leave. The employer had significant control over the employee and could even take penal actions against the workers if they did not do what they were told which was made possible by the Master and Servant Act (Games, 2007). Contracts of employment have evolved since then.
At present every worker in the UK who is employed by an employer has a contract of employment which sets out the employment relationship between the two parties (ACAS, 2017). The contract of employment will normally set out the terms of the relationship and cover areas of - employment conditions, holiday entitlement, rights, responsibilities and duties of both sides of the agreement (GOVUK, 2016a). A significant amount of details are usually set out in the contract of employment in order to identify which party is responsible for which actions.
In the UK contracts of employment and the following legal rights distinguish between a worker and an employee (GOVUK, 2016b). The differentiation allows organisations and workforce to have more flexibility in terms of their responsibilities to each other. The employment protection legislation varies depending on the legal classification of the personnel in the contract of employment (see Table 1).
Flexible workforce
Numerical and Functional flexibility
Upton (1995) suggests that flexibility is the ability to change or react to changing processes in the environment and to do it in a way that does not cause losses in terms of time, effort, cost or performance. Pinker et al. (2009) expands on the definition and suggests that flexibility is not only the ability to react and change to changing processes, but rather flexibility should be seen as the absence of constraints. In the absence of constraints management can better match the supply of resources to the demand and the closer to complete absence of constraints the organisation is the more agile it can be in the marketplace.
Atkinson (1985) proposes that employment flexibility can be achieved through two distinct ways - numerical and functional flexibility. Numerical flexibility allows to deal with business cycle fluctuations and business trends by reducing capacity of workforce in the organisation which in turn reduces variable costs of the operation and liabilities. Numerical flexibility is achieved by adjusting the amount of workforce to changing circumstances in the market by giving flexible contracts and/or by outsourcing.
To gain numerical flexibility organisations can hire employees on part-time, casual, zero-hour and other types of flexible contracts of employment. This allows organisations to hold on to its workforce. Outsourcing involves subcontracting activities to other businesses and reducing the overall amount of employees directly employed. Gorg and Hanley (2004) suggest that the success of outsourcing depends on the size of the organisation, and the size of transaction costs. If transaction costs are high a small organisation may not benefit from the activity whilst a large organisation can benefit from the activity at least in the short run. Therefore the results from gaining numerical flexibility for organisations and employees can be diverse and are dependent from each case individually.
Unison (2017) argues that although outsourcing may lead to a reduction in liabilities and increased profitability, it is also the reason for the rise of a two-tier workforce. The rise leads to increased inequality amongst people who do the same job and have the same responsibilities, but are employed by another organisation or under a different type of employment contract. Functional flexibility on the other hand relates to changes in the tasks and the amount of tasks that employees need to carry out, it is seen as skill adjustment of workforce to meet changing workplace demand, and thus does not reduce the liabilities of the organisation towards the workforce. Therefore for organisations numerical flexibility can be seen as a more appropriate way of adjusting to changing market demands as a significant part of risk is transferred from employer to workforce.
Fredman (1997) suggests that flexible working is a mere transfer of risks of business cycles from employer to the employee and notes that these types of contracts are characterized by insecurity, unpredictability and in some cases fluctuations in pay for the workforce. Although flexible working arrangements have been used throughout history, the development of technology, transportation, communication, and trade openness has led to an increase pressure on organisations to have a numerically flexible workforce to adapt to changing economic and business conditions. Whilst from an employee perspective ZHCs could be seen as downgrading of their rights and bargaining position in the workplace, Chan (2014) suggests that flexible and competitive labour markets can greatly benefit businesses in times of economic hardship and allow organisations to take on more risk.
Zero-Hour Contract of Employment – the Highest Stage of Flexible Workforce
What are zero hour contracts?
In comparison to a traditional contract of employment ZHC is not a legal term and has no specific legal status in the UK (Eurofund, 2015). Furthermore, it does not have one specified legal definition either. ACAS (2017b) suggests that most ZHCs will give the staff ‘worker’ employment status, however Eurofund (2015) notes that this can vary depending upon different firms. The main difference that distinguishes ZHCs from other contracts of employment is that under this type of contract the employer is not obliged to provide the employee with a predetermined set amount of hours of work or any work at all over any period of time (CIPD, 2017). At the same time, ZHC worker is not obligated to accept the offered work and can, following the Small Business, Enterprise and Employment Act 2015 which included a ban on Exclusivity clauses in ZHCs, work for other employers (Simpson, 2015). Furthermore, staff with a ‘worker’ status are entitled to fewer rights than staff with an ‘employee’ legal employment status (see Table 1).
Office of National Statistics (ONS) (2016) suggests that the ZHCs of employment may not always be explicitly called this way and different terminology may be used. Therefore by not having a legal definition and status, organisations can in some cases interpret the ZHCs in different ways and as a result the rights and responsibilities of the employer and employee relationship may differ depending on the organisation itself, market it operates in and other industry specific conditions. However, the common element that unites the different types of contracts is the absence of predetermined guaranteed set hours of work over a period of time, and the requirement by the employer towards staff to be available for work as and when required. Staff employed under these types of contracts have the legal right to choose the hours they work and to turn down the employer, if the hours do not fit them.
The rise of zero-hour contracts in the UK
The decade of 1980s, in the UK, saw two economic recessions, high interest rates and a continuous fall in manufacturing output coupled with high unemployment rates (Rogers, 2013). Fredman (1997) indicates that the trend of numerical flexibility in a workplace started during this decade. The power of collective bargaining, in the form of trade unions, was reduced significantly and their membership fell sharply during this period. Monetarism economic policy adoption coupled with supply-side economics of the UK government gave more flexibility to organisations in terms of recruitment which in turn gave rise to the non-standard jobs, employment agreements similar to ZHCs and other types of flexible working arrangements, which grew from 30% to 36% of total employment. Since then, ZHCs have been used to varying degrees by the management of organisations (depending on economic and business environments).
Following the 2008 world financial crisis, and the subsequent aftermath, the UK unemployment rate grew (See Graph 1) from 5.7% in 2008 to a peak of 8.1% of total workforce in 2011 (Statista, 2017).
The high unemployment rate was the consequence of financial engineering by the world’s leading financial institutions which caused excessive, irresponsible lending and led to a rise of house-hold debt and a bubble in the real-estate sector (The Economist, 2013). As a result most world economies dipped in to recession and business confidence fell sharply. Research by ICAEW (2014) shows that in the UK it fell to -45.3 in 2009, the lowest point since 1980 (OECD, 2017). In times of economic and business future uncertainty, high rates of business bankruptcies coupled with rising unemployment rates may lead businesses to cut down investment and be reluctant to expand their operations. The uncertainty may lead to unknown demand and risk of significant financial losses resulting from lack of demand in the market both domestic and international. Organisations will seek to mitigate potential financial losses by adapting new management practices.
In order to cut down on potential financial losses in the event of an unsuccessful expansion or investment and remain agile to changes in macroeconomic environment ZHC’s gained increased popularity amongst organisation management in the aftermath of the global financial crisis of 2008 (see Graph 2).
Organisation managements saw an opportunity to adapt to the change in the economic environment by adapting zero hour contracts. It was particularly evident in the retail and hospitality sector. Statistical data about ZHC arrangements in the overall workforce are collected from two sources – surveys of business and surveys of workers. Although the statistical data shows that there has been positive growth, following the 2008 Financial Crisis, in the use of ZHCs, the collected statistical data reliability is subject to discussion and the real figure may be larger.
O’Connor (2015) has raised concerns about the precision of the published data because
Brinkley (2016) raises concern that although statistically the unemployment rate has reduced the amount of hour’s staff actually work per week under ZHCs is less than the what they would like to work. He indicates that although unemployment rate has fallen since the 2008 Financial Crisis it has also increased the rate of underemployment (see Graph 3) – a situation where employees are overqualified for the job they do or part-time workers willing to take a full time job cannot find one. However whilst the statistical data might not be precise due to problems in collecting data coupled with the potential problem of underemployment it is evident that the management of organisation utilises these contracts.
In particular the use of ZHC’s as a tool to provide flexibility for employer and workforce has been high in two sectors – hospitality and retail, both of which account for more than 50% of all UK ZHCs (see Graph 4). Research by TUC (2013) shows that the adaption of ZHCs have spread to industries such as health care, education, aviation industry.
This suggests that the use of ZHCs by organisation management is not limited to low skilled jobs in highly competitive industries with highly fluctuating demand, but it is also prevalent in other industries which require highly skilled staff whilst also demanding flexibility from them. As a result of increased international trade and competition, organisations are choosing flexible employment contracts to adjust to the changing environment of doing business.
Zero Hour Contracts - Management perspective
Pennycook (2013) suggests that from a management’s perspective ZHCs allow maximum flexibility in meeting the fluctuating and often unpredictable demand in the marketplace. Numerical flexibility, which is achieved through flexible employment contracts, of workforce is seen as a way of transferring risks and liabilities from management to the workforce. Kelleberg (2003) suggests that the push towards more flexibility through the utilization of numerical flexibility leads to workforce segmentation - the division of workforce into insiders and outsiders. The former tend to have higher job security and rights whilst the later are exposed to higher risk in job security and rights.
As a result of this division between insiders and outsiders the pressure of polarization of workforce and wages is increased. From a managements perspective the division and polarization of workforce may be a positive effect as it reduces the strength of collective bargaining over employee rights and strengthens the position of the organisation. Thus, it is likely that the motivation and loyalty of workforce towards management will be reduced.
Whilst ZHCs might not always be the best form of flexible working for workforce Peers (2013) suggests that flexible working arrangements are a good way for management to increase productivity and reduce costs. The ability of management to adapt the workforce to changing demand will allow utilising it to a high level of efficiency. The successful integration of numerical flexibility in an organisation improves the likelihood of management to expand the business operation in times of uncertainty, high risk ventures and rapidly changing marketplace where internal workforce flexibility is not possible and the workforce itself contributes to a large proportion of overall costs.
Clements (2013) suggests that ZHCs not only provide organisations with flexibility in volatile times, but they also allow adapting to a rapidly diverse workforce with different requirements and needs. By being able to offer ZHC flexibility to workforce in terms of choosing when to work, and the ability to work for several employers at a time, following the ban on exclusivity rights, gives organisation management the chance to recruit talented workers who might otherwise not take on the job due to restrictions in their flexibility.
Are Zero Hour Contracts a New Trend in Management?
Based on solely statistical data it is unclear whether the use of ZHCs in the workplace is a trend in management practice to reduce risk and liabilities, or it is the result of raised awareness of such contracts that has led to the significant increase in numbers of these contracts since the 2008 Financial Crisis reported to ONS. As a result, a significant statistical error may be present. Hern (2013) suggests that although a person might be employed under a ZHCs and Office of National Statistics might see the person as working, in reality it can be the case that the person does not actually work any hours for the employer.Although it is difficult to collect reliable data, from a management practice perspective it is evident that the use of these contracts has grown following the increased economic uncertainty in the aftermath of the financial crisis. The increased numerical flexibility that organisations can achieve through ZHCs, and often offer flexibility to their staff, allows adapting to the rapidly changing globally integrated marketplace which is affected by global competition, demand. Often depending from the competitor country of origin labour market rigidness can be a disadvantage to the competitiveness of the domestic organisation.
Conclusion
The analysis of available data and information coupled with academic research shows that ZHCs are used by organisation management. In particular over the last decade there has been a significant growth in the awareness and use of these types of contracts. The main cause for using such contracts is risk and liability reduction from an organisations point of view, and the possibility to pick and choose when and how to work for the workforce. Although significant disadvantages from the workforce perspective were identified, the flexibility that is offered by these contracts may be seen as outweighing the negative aspects of ZHCs.References
Atkinson, J. (1985) Flexibility, Uncertainty and Manpower Management. Brighton: The Institute For Employment Studies.
ACAS (2017) Contracts of employment [Online] Available from: http://www.acas.org.uk/index.aspx?articleid=1577 [Accessed 22 January 2017].
ACAS (2017b) Zero Hours contracts [Online] Available from: http://www.acas.org.uk/index.aspx?articleid=4468 [Accessed 29 January 2017].
Brinkley, I. (2016) New Statistics on Zero-Hours Contracts [Online] Available from: http://www2.cipd.co.uk/community/blogs/b/policy_at_work/archive/2016/09/21/new-statistics-on-zero-hours-contracts [Accessed 29 January 2017].
Chan, S., P. (2014) UK labour market an example to rest of EU: OECD chief [Online] Available from: http://www.telegraph.co.uk/finance/economics/10763216/UK-labour-market-an-example-to-rest-of-EU-OECD-chief.html [Accessed 6 February 2017].
Clements, S. (2013) Zero-hours contracts aren't the problem. Poor management is [Online] Available from: https://www.theguardian.com/commentisfree/2013/nov/27/zero-hours-contracts-problem-poor-management-flexibility-employers [Accessed 7 February 2017].
CIPD (2017) Zero-hours Contracts [Online] Available from: https://www.cipd.co.uk/knowledge/fundamentals/emp-law/terms-conditions/zero-hours-factsheet [Accessed 27 January 2017].
Eurofund (2015) Zero-hours contracts [Online] Available from: http://www.eurofound.europa.eu/observatories/eurwork/industrial-relations-dictionary/zero-hours-contracts [Accessed 29 January 2017].
Farrell, S. and Press Association (2016) UK workers on zero-hours contracts rise above 800,000 [Online] Available from: https://www.theguardian.com/uk-news/2016/mar/09/uk-workers-on-zero-hours-contracts-rises-above-800000 [Accessed 29 January 2017].
Fredman, S. (1997) ‘Labour Law in Flux: The Changing Composition of the Workforce’. Industrial Law Journal, 26 (4): 337-352.
Games, A. (2007) 'Masters, Servants, and Magistrates in Britain and the Empire, 1562-1955 (review)'. Journal Of Interdisciplinary History, 37 (4): 607-609.
Gorg, H. and Hanley, A. (2004) 'Does Outsourcing Increase Profitability?'. The Economic and Social Review. 35 (3): 267-288.
GOVUK (2016a) Employment contracts [Online] Available from: https://www.gov.uk/employment-contracts-and-conditions/overview [Accessed 22 January 2017].
GOVUK (2016b) Employment status [Online] Available from: https://www.gov.uk/employment-status/worker [Accessed 22 January 2017].
Hern, A. (2013) How zero-hours contracts hide real unemployment [Online] Available from: http://www.newstatesman.com/economics/2013/08/how-zero-hours-contracts-hide-
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